Lease Agreements – Force Majeure
“Any damage which is produced by a fortuitous event, or inconsequence of an irresistible force, shall, in the absence of an express provision of the law to the contrary, be borne by the party on whose person or property such damage occurs.”
Nevertheless, Maltese jurisprudence has established that force majeure as a defence under this provision is very difficult to be established and upheld by our courts. The terms used in this context include: force majeure, fortuitous event and Act of God. In order for this defence to be successful, it is important to prove that the damage would be completely due to a fortuitous event. It is important also that there is no contributory negligence on the part of defendant otherwise the Act of God defence would not succeed. Thus, for force majeure to successfully succeed, the following must concur:
1. An unusual irregular event not dependent on an act or omission of man;
2. Due to some natural cause;
3. Inevitable/unavoidable and irresistible;
May this defence of force majeure be applied to lease agreements within the period of this current COVID-19 pandemic?
The pertinent question in this case is: can the current pandemic be deemed to constitute a force majeure?
Tenants cannot opt to stop paying rent or to request discounts on rent on grounds of force majeure. If it is established that this current pandemic may constitute force majeure, then this may amount to a ground for opting-out oflease agreements. Nevertheless, this also depends on whether the lease agreement provides for early termination in view of force majeure or whether this pandemic may indeed be qualified as force majeure by our courts. Therefore, it is important for both the tenants and landlords to review their lease agreements. If no such clauses exist, then the matter islargely-dependent upon mutual relationship, the nature of business, the likely impact of Covid-19 on both parties and consequent bargaining capacity.
Hence, for tenants or landlords to terminate the lease, either one must prove that this pandemic qualifies as a force majeure. Otherwise, they may pursue grounds of termination provided for in the lease agreement itself or in the Civil Code. Unless, the two parties enter into a voluntary agreement on the matter, Maltese law does not cater for any discounts or waivers of rent. It is also noteworthy that the newly enacted law on private residential leases, namely, the Private Residential Leases Act, alsofails to provide for situations of force majeure in such private lease agreements, or for cases whereby rent may be reduced or waived in instances of force majeure. It would be truly interesting to see whether our courts shall be upholding this defence of force majeure in cases dealing with such lease disputes arising due to this pandemic in the near future.
This article is not to be considered as legal advice, and is not to be acted on as such. Should you require further information or legal assistance, please do not hesitate to contact us on firstname.lastname@example.org